North Korean House of Cards

currency brought power. Access to foreign currency funding streams brought influence
and independence. Allowing these funds to come into the regime unchecked created a
potential problem for Kim’s ability to consolidate power. Therefore, by creating Office
38 to oversee and coordinate these various funding streams, Kim Jong-il exerted his
control over a source of revenue that would become increasingly important at a time
when support from North Korea’s traditional patrons, such as the Soviet Union, and
other sources was declining.
To create Office 38, Kim Jong-il used some of the infrastructure belonging to
the KWP FSD. The centerpiece of the office’s apparatus was the Kwangmyongsong
(“bright star”) General Corporation. This trade organization was the face of Office 38
and was responsible for deals ranging from food and raw materials to high-tech areas,
such as information technology (IT) and biotechnology (BT). 396 As the Director
of the Kwangmyongsong General Corporation and the Director of Office 38, Rim
Sang-chong was able to travel incognito around the world, including to critical
markets in the West. 397 The Koryo Bank was established to conduct the banking for
Office 38 operations.
Early on, Office 38 became responsible for procuring the daily necessities
from foreign countries for Kim Jong-il and his family. In contrast to Office 39,
where funds were primarily earmarked for Kim Jong-il’s power consolidation and
gift politics, Kim treated the earnings generated by Office 38 as his own personal
funds. Office 38 also became a channel for tapping into hostile western economies
through their connections to South Korean businesses. As such, the office
maintained a close working relationship with the intelligence bodies dedicated to
operations against the South, namely Office 35.
As Kim Jong-il became the Supreme Leader, the Party economy began
to dwarf the state economy, surpassing it in terms of production, exports, and
imports. 398 The infrastructure of Office 38 and 39 grew substantially, adding
396 The Kwangmyongsong General Corporation steadily grew in importance as South Korean
administrations eased restrictions on North Korea. In 1996, South Korea secretly sent approximately
3,400 tons of flour (worth $986,000) to North Korea. This was a quiet deal arranged by South Korea’s
Presidential Secretariat, despite the government’s policy at the time to suspend food aid to North Korea.
An additional $4 million worth of food aid was given to Pyongyang later in 1996 with the financial
support of several big business groups. Hyundai Group financed the first shipment, which was delivered
to the Kwangmyongsong General Corporation.
397 Jang Yong-Hoon, “What Kind of an Organization Is North Korea’s Kwangmyongsong
Guidance Bureau?” Yonhap News Agency, December 3, 2002. By the early 2000s, the Kwangmyongsong
General Corporation was identified as existing under the Ministry of Trade. It is unclear whether it had
been removed from Office 38 by this time.
398 Author’s interviews with several Pyongyang-watchers in Seoul with special knowledge of
the North Korean economic system. Under Kim Jong-il, the Royal Economy accounted for nearly sixty
percent of the economy by the late 1990s and 2000s.
Ken E. Gause
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